As the hysteria over global warming heats up, carbon taxes have become the “cool” option. Environmentalists love them. So do politicians, who are more than happy to raise taxes while scoring political points.https://amgreatness.com/2017/12/06/why-carbon-taxes-actually-increase-global-emissions/
Carbon taxes, or other analogous pricing schemes, are now prevalent in Western Europe, and are making headway in North America. For example, California recently joined forces with the Canadian Provinces of Ontario and Quebec to create an integrated cap-and-trade carbon market.
On top of this, many well-known economists support carbon taxes, thinking they’re the best way to mitigate man’s contribution to climate change. A relatively new report written by thirteen leading economists under the direction of professors Nicholas Stern and Joseph Stiglitz—who won a Nobel Prize in 2001—recommends the adoption of a global carbon tax. The tax would value carbon emissions somewhere between 50 and 100 USD per ton by 2030, and would cost upwards of $4 trillion. Theoretically, the tax would raise the cost of using carbon-intensive sources of energy, thereby nudging producers to switch from fossil fuels to “green energy” sources like wind and solar power. Likewise, it would raise the cost of electricity, thus creating an incentive to use energy more efficiently.
As an abstract principle of theory, this seems to make sense. There’s just one problem. It won’t work.
In reality, carbon taxes are just that: taxes. They’re a money-grab dressed up with good intentions. Worse still, carbon taxes will not reduce our greenhouse gas emissions. Instead, adopting carbon taxes in the West will actually raise global carbon emissions by offshoring economic activity from relatively environmentally-friendly places, like the USA and Germany, to places with lax environmental laws, like China.
Open Markets & Offshoring
Wealth is like water: it flows to the lowest possible point, and continues to do so until the level is equal. This is why consumers chase cheaper goods, why investors look for undervalued companies, and why multinationals offshore to cheaper markets. This last point—offshoring—is why Western carbon taxes will actually increase global emissions.